Senate passes bill to overhaul patent system

JIM ABRAMS, Associated Press

The nation's outmoded patent system, which has forced innovators and inventors to wait years and outlast challenges and lawsuits before getting recognition for their products, would be overhauled under a measure passed Tuesday by the Senate.

The legislation, which was approved 95-5, transforms a patent system now operating under a law passed in 1952, at a time when the high-tech revolution was still in the future and international competition was still negligible. It now moves to the House.

President Barack Obama said he looked forward to signing into law "the most significant patent reform in over half a century" to help grow the economy and create jobs.

The most substantial change brought about by the bill would be to switch the United States to a "first-inventor-to-file" system for patent applications used by all other industrialized countries rather than the current "first-to-invent" system. Supporters say the first-to-file system would put American innovators on the same page as their overseas competitors, making the process simpler, more certain and less expensive.

Sen. Orrin Hatch, R-Utah, a leading sponsor, said it can cost $500,000 in legal fees if there is a dispute over who is the first to invent a product. Under the new system, he said, an inventor can pay $100 for a provisional application to protect his invention.

To meet the concerns of independent inventors and small businesses that first-to-file would give the edge to corporations with the resources to file quickly and often, the bill gives a one-year grace period to protect academics and other inventors who disclose their inventions before filing for a patent.

Patent office director David Kappos said first-to-file was "a win for all American innovators, of all sizes and all industries."

Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee, has tried for years to move patent legislation. First-to-file, he said, "allows us to put America at the pinnacle of innovation by ensuring efficiency and certainty in the patent system."

The bill also seeks to narrow the gap between the U.S. Patent and Trademark Office, which now takes about three years to process a patent, and the 21st century high-tech world where products are continually being made obsolete by new breakthroughs.

It allows the patent office to determine fees and stops the practice of diverting patent fees to the general Treasury to ensure that the office has the resources to hire more qualified examiners and modernize its computer systems. Sen. Tom Coburn, R-Okla., who pushed to end the diverting of funds, said that last year some $53 million in fees was spent elsewhere.

Currently the standard fee for filing an application is $1,090, although the bill expands discounts available to small businesses and independent inventors.

The patent office now has a backlog of 700,000 applications waiting initial action and 500,000 applications being processed.

The bill also tries to improve patent quality by allowing third parties the opportunity to submit information opposing pending patents and establishing an administrative review process for challenging the validity of a granted patent. It sets a higher threshold for initiating challenges, with the intent of reducing the litigation costs of drawn-own court challenges.

The legislation has garnered a broad spectrum of support from pharmaceutical companies, large corporations such as IBM and Motorola, academic groups such as the Association of American Universities, and labor groups including the AFL-CIO.

The bill, said The Coalition for 21st Century Patent Reform, a group whose 50 members includes Caterpillar, General Electric, Eli Lilly and Procter & Gamble, will provide the patent office with "the tools and funding it needs to process patents in a more effective and efficient way. Accordingly, this legislation will make our nation more competitive in the global marketplace."

The main opposition has come from small-scale inventors leery of the first-to-file system and high-tech companies opposed to provisions in the bill dealing with patent reviews.

The Coalition for Patent Fairness, which represents high-tech companies such as Apple, Google and Oracle and has been a leading voice of dissent on the legislation, said the bill was "moving in a promising direction" after the Senate approved an amendment to take out provisions dealing with damages and court venues. It said it would continue to work with Congress to address the concerns of America's top innovators, including the issues of patent office funding and patent quality reform.

The action now moves to the House, where Judiciary Committee Chairman Lamar Smith, R-Texas, has indicated he plans to introduce a companion bill in the coming weeks.

Commerce Secretary Gary Locke told reporters that he was in "constant contact" with both Leahy and Smith on the issue. Past efforts to pass patent overhaul legislation have fallen victim to the pressures of clashing interest groups, but Locke said that the chances this year were better than ever before. "The stars are really aligned," he said.